Mairead McGuinness, EU Commissioner for Financial Services, has stated that the European Union’s failure to enact financial reforms is causing it to trail behind its economic competitors. She expressed concerns about the state of the EU’s capital markets, characterising them as too small, too divided and too ineffective to supply the necessary funding for increased investment.
The issue stems from the lack of progress on a single capital market across Europe, largely due to some member nations fearing potential losses resulting from the proposed reforms. McGuinness stressed that without improvements, the EU’s insufficient and fragmented capital markets will hamper the private financing required.
McGuinness conveyed these concerns to Mr. Draghi, adding that the sluggish and inadequate progress towards unified European capital markets is a primary reason why the EU lags behind many developed economies in terms of capital market size and depth. She mentioned that this issue results in slower economic growth, negatively affecting the EU’s global standing.
The Fine Gael representative pointed out that clearer support for systemic change was present, however, actual steps need to be taken. McGuinness highlighted the importance of Draghi’s forthcoming report on EU competitiveness amidst what she described as the most significant geopolitical shift since World War Two.
She also emphasised the urgent need for changes that allow people to invest their money in the market more easily rather than merely depositing it in banks. She noted that currently, the capital markets typically offer complex, expensive products that yield disappointing returns, a situation that needs rectification.
Advancements in capital market reforms present the potential for leveraging more private financing, which may contribute to the significant capital required for investments in renewable energy in the near future, according to her. Even though the notion of a singular authority supervising capital markets in varied EU nations has sparked debates, McGuinness suggests that a fundamental requirement would be to augment the capacity of the European Securities and Markets Authority (Esma).
She, the commissioner, further emphasised the necessity for alterations to wrestle with inconsistencies in national laws related to taxation, insolvency, and accounting methods, pointing out the remaining barriers to cross-border activities that need to be removed. She mentioned that despite the EU regulatory structure, diverging national regulations contribute to the fragmentation of the Single Market. It is essential, she wrote, to implement a standardised ruleset across all member states.